August 2010

08/31/2010

Josh Lukeman, saves what I believe is his best chapter for last, in his book The Market Maker's Edge. In the 23rd chapter, entitled The Trading Mind,
Lukeman lists several factors that are crucial in developing the proper
awareness of the psychological and emotional influences on your actions
as a trader. They are as follows:

1. FEAR: "Fear is
perhaps the most debilitating emotion a trader can experience. Painful
memories produce fear, which warps a trader's focus. When you are
afraid to lose for one reason or another, you will end up focusing on
loss and, by so doing, will attract precisely the opposite of what you
hope to avoid" (272)

2. LISTEN TO THE MARKET: "Waiting
for the market to confirm your initial opinion is crucial. The market
provides clear signals for the best course of action, regardless of your
opinion. You must let go of any preconceptions about what the market
is going to do, and instead remain focused on what the market is doing here and now" (273).

3. ACCEPT RESPONSIBILITY:
"When you accept responsibility for everything that happens in your
life, you empower yourself to create the trading world you would like.
By accepting responsibility for your trades, you empower yourself to
consistently improve your performance in the future" (277).

4. GREED:
"If you are driven by greed, then you are trading in a state in a state
in which you are constantly aware of what you do not have. This is
called poverty consciousness, and it will work against your goals of
creating abundance in your life" (277).

5. FRUSTRATION:
"Your success as a trader at times hinges on your ability to conquer
frustration. Frustration will always appear on the path toward
greatness. Some will triumph over it, while others succumb to its
pettiness. When you encounter obstacles on your trail toward
achievement, remind yourself that they were placed there in order for
you to overcome them, so you can learn from them and become better than
you were before" (278).

6. REGRET: "Regret is toxic
because it encourages you to look back and to focus your energies on the
past, when you should be using your valuable time and energy to focus
on the here and now in order to uncover trading opportunities" (279).

7. CONFIDENCE:
"The best traders are successful because they are able to maintain
unshakable confidence in themselves and in their decisions. This serene
self-confidence creates a positive state of mind and the will to act"
(279).

8. PROSPERITY CONSCIOUSNESS: "As a trader an
important question to ask yourself is whether you feel that you truly
deserve to be wealthy. This question must be answered honestly. If you
do not believe you deserve to be wealthy, sooner or later you will
sabotage your chances for success" (281).

9. SECURITY ILLUSION:
"When you are trading for security, you are attempting to keep what you
have because you are afraid to lose. This fear will inhibit your
actions and will make you a less effective trader. When you fear
losing, you will actually create losses. You will be unable to cut your
losses when they are small, and you will miss great trading
opportunities because you are afraid to lose" (282).

10. WRITE IT DOWN:
"Write down your trading goals, and be as specific as possible. The
goals need to be measurable, so when you achieve them you will know it.
Remember to be very specific. Once your brain has the target, it can
begin to figure out ways to achieve it" (283).

It is very important that traders get their mind right, for the proper trader's mind is a terrible thing to waste...just ask a losing trader.